CSA issues guidance on when crypto trades may be outside securities laws

MONTREAL — Securities regulators in Canada have issued clarification around when a cryptocurrency trade may fall outside of securities laws as part of an evolving understanding of how rules apply to the relatively new asset class.

The Canadian Securities Administrators, which represents provincial regulators, says that in some cases crypto assets are clearly securities and so fall under such laws, but that there are cases where they may not apply, as some crypto-trading platforms have argued.

The issue has become clouded in recent years as many cryptocurrencies and tokens have been issued as ways of raising funds, with potential voting or dividend rights attached to make it more like a security.

It’s further complicated by the way some crypto trading platforms work, where the platform continues to hold the crypto assets for users, which exposes users to insolvency and other risks of the platform.

The administrators say that only if the crypto asset is not a security, and that it is also delivered to users immediately after a trade, would it be potentially outside the bounds of securities law.

The CSA advises trading platforms to consult with legal counsel. It said it also intends to take enforcement actions platforms that don’t comply with securities laws, including platforms outside of Canada that have Canadian clients.

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